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Finance Act 1997

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This is the original version (as it was originally enacted).

Schedule E

61Phasing out of relief for profit-related pay

(1)Chapter III of Part V of the Taxes Act 1988 (profit-related pay) shall have effect as if, in section 171(4) (£4,000 limit on relief for profit period of twelve months), for “£4,000” there were substituted—

(a)in relation to profit-related pay paid by reference to profit periods beginning on or after 1st January 1998 and before 1st January 1999, “£2,000”; and

(b)in relation to profit-related pay paid by reference to profit periods beginning on or after 1st January 1999 and before 1st January 2000, “£1,000”.

(2)That Chapter shall not have effect in relation to any payment made by reference to a profit period beginning on or after 1st January 2000.

(3)Accordingly—

(a)a scheme shall not be registered under that Chapter if the only payments for which it provides are payments by reference to profit periods beginning on or after 1st January 2000; and

(b)registration under that Chapter shall end on 31st December 2000.

62Travelling expenses etc

(1)For subsection (1) of section 198 of the Taxes Act 1988 (relief for necessary expenses) there shall be substituted the following subsections—

(1)If the holder of an office or employment is obliged to incur and defray out of the emoluments of that office or employment—

(a)any amount necessarily expended on travelling in the performance of the duties of the office or employment,

(b)any other expenses of travelling which are not expenses of ordinary commuting but are attributable to the attendance of the holder of the office or employment at any place on an occasion when his attendance at that place is in the performance of the duties of the office or employment, or

(c)any amount not comprised in expenses falling within paragraph (a) or (b) above but expended wholly, exclusively and necessarily in the performance of the duties of the office or employment,

then (subject to subsection (1A) below) there may be deducted from the emoluments to be assessed the amount which is so incurred and defrayed.

(1A)Where—

(a)any person holding an office or employment undertakes any travelling the expenses of which fall within paragraph (a) or (b) of subsection (1) above, and

(b)in consequence of his doing so, he does not incur expenses of ordinary commuting which it is likely he would have incurred had he not undertaken that travelling,

the amount (if any) which is deductible under subsection (1) above in respect of that travelling, or in respect of expenses incurred as mentioned in paragraph (c) of that subsection in connection with that travelling, shall be reduced by the amount of the expenses of ordinary commuting that have been saved.

(1B)For the purposes of subsection (1A) above the amount of any saving on ordinary commuting shall be calculated by using the same method for the expenses of the travelling comprised in ordinary commuting as would be used in the employee’s case for calculating the deductible expenses of that travelling if it were not ordinary commuting.

(2)After section 198 of that Act there shall be inserted the following section—

198AInterpretation of section 198

(1)For the purposes of section 198 and this section ordinary commuting, in relation to the holder of an office or employment, is—

(a)travelling, in either direction, between a permanent workplace of his and a place mentioned in subsection (4) below (including any travel via another place so mentioned); or

(b)travelling between two places in a case where, because of the proximity of one place to another, the journey in question is, for practical purposes, the same as a journey which would constitute ordinary commuting by virtue of paragraph (a) above.

(2)For the purposes of section 198 and this section a permanent workplace, in relation to the holder of an office or employment, is any place which—

(a)he regularly attends in the performance of the duties of the office or employment and otherwise than for the purpose of performing a task of limited duration or for some other temporary purpose; and

(b)is not a place falling within subsection (4)(a) below.

(3)The holder of an office or employment who does not have a permanent workplace apart from this subsection but is a person who—

(a)in the performance of the duties of the office or employment, attends different places within a particular area, and

(b)performs his duties at places in that area because his duties (except so far as requiring his attendance at places outside that area for the purpose of carrying out tasks of limited duration or for other temporary purposes) are defined by reference to that area,

shall be deemed for the purposes of section 198 and this section to have a permanent workplace comprising the whole area.

(4)The places referred to in subsection (1) above, in relation to the holder of an office or employment, are—

(a)his home or any other place which he uses, otherwise than in the performance of the duties of that office or employment, as a permanent or temporary place of residence,

(b)any place that he is visiting for social or personal reasons and otherwise than in the performance of the duties of that office or employment,

(c)any place that he attends, otherwise than in the performance of the duties of that office or employment, for the purposes of any trade, profession or vocation carried on by him, and

(d)any place that he attends in the performance of the duties of another office or employment held by him.

(5)For the purposes of this section attendance for limited purposes at—

(a)a place which forms the base from which a person works in the performance of the duties of his office or employment, or

(b)the place at which he is allocated the tasks that he is to carry out in the performance of those duties,

shall not be taken to involve attendance at that place to perform a task of limited duration or for a temporary purpose.

(6)For the purposes of this section, where on any occasion a person attends any place in the performance of the duties of any office or employment or performs those duties within a particular area—

(a)the tasks which he carries out on that occasion at that place, or within that area, shall not be taken to be tasks of limited duration, and

(b)the purposes for which, on that occasion, he attends that place or performs duties within that area shall not be taken to be temporary purposes,

if subsection (7) below applies to the place or area as respects that occasion.

(7)This subsection applies to a place or area as respects any occasion on which a task is carried out, or duties are performed, by a person holding an office or employment if—

(a)the task is carried out, or the duties are performed—

(i)in the course of a period of continuous work at that place or within that area; or

(ii)at a time which it would be reasonable, on that occasion, to assume will be included in such a period;

and

(b)the period of continuous work is one of which more than twenty-four months has expired before that occasion or is one which it would be reasonable, on that occasion, to assume will in due course be either—

(i)a period of more than twenty-four months; or

(ii)a period comprising all or almost all of the period for which the person holding the office or employment is likely to continue to hold it after that occasion.

(8)The reference in subsection (7) above to a period of continuous work at a place or within an area is (subject to subsection (9) below) a reference to any continuous period throughout which the duties of the office or employment in question fall to be performed wholly or mainly at that place or, as the case may be, within that area.

(9)For the purposes of subsection (8) above any actual or contemplated modification of the place at which, or of the area within which, the duties of any office or employment fall to be performed shall be disregarded unless it is such that it has had, or would have, a significant effect on the expenses of any travel by the person holding the office or employment to or from the place or area where those duties fall wholly or mainly to be performed.

(10)For the purposes of this section, where a person holds any office or employment with a company, the reference in subsection (4)(d) above to another office or employment does not, in relation to that office or employment, include a reference to an office or employment with another company in the same group of companies.

(11)For the purposes of subsection (10) above two companies shall be taken to be members of the same group if, and only if, one of them is a 51 per cent. subsidiary of the other or they are both 51 per cent. subsidiaries of a third company.

(3)In section 158 of the Taxes Act 1988 (car fuel scales), in subsection (6) at the beginning there shall be inserted “Subject to subsection (7) below,”; and after that subsection there shall be inserted the following subsection—

(7)Subsection (6) above does not apply in the relevant year unless the employee is required to make good, and does make good, to the person providing the fuel so much of the expenses incurred by him in or in connection with the provision of fuel for business travel as, for the purposes of section 198(1A), would be taken to represent expenses of ordinary commuting which (disregarding the requirement to make good) have been saved in consequence of the business travel having been undertaken.

(4)In subsections (5) and (5A) of section 168 of the Taxes Act 1988 (meaning of business travel), for paragraph (c) there shall be substituted, in each case, the following paragraph—

(c)“business travel”, in relation to any employee, means any travelling the expenses of which, if incurred out of the emoluments of his employment, would be deductible under section 198;.

(5)This section has effect for the year 1998-99 and subsequent years of assessment.

63Work-related training

(1)After section 200A of the Taxes Act 1988 there shall be inserted the following sections—

200BWork-related training provided by employers

(1)This section applies for the purposes of Schedule E where any person (“the employer”) incurs expenditure on providing work-related training for a person (“the employee”) who holds an office or employment under him.

(2)Subject to section 200C, the emoluments of the employee from the office or employment shall not be taken to include—

(a)any amount in respect of that expenditure; or

(b)any amount in respect of the benefit of the work-related training provided by means of that expenditure.

(3)For the purposes of this section the employer shall be taken to incur expenditure on the provision of work-related training in so far only as he incurs expenditure in paying or reimbursing—

(a)the cost of providing any such training to the employee; or

(b)any related costs.

(4)In subsection (3) above “related costs”, in relation to any work-related training provided to the employee, means—

(a)any costs which are incidental to the employee’s undertaking the training and are incurred wholly and exclusively as a result of his doing so;

(b)any expenses incurred in connection with an assessment (whether by examination or otherwise) of what the employee has gained from the training; and

(c)the cost of obtaining for the employee any qualification, registration or award to which he has or may become entitled as a result of undertaking the training or of undergoing such an assessment.

(5)In this section “work-related training” means any training course or other activity which is designed to impart, instill, improve or reinforce any knowledge, skills or personal qualities which—

(a)is or, as the case may be, are likely to prove useful to the employee when performing the duties of any relevant employment; or

(b)will qualify him, or better qualify him—

(i)to undertake any relevant employment; or

(ii)to participate in any charitable or voluntary activities that are available to be undertaken in association with any relevant employment.

(6)In this section “relevant employment”, in relation to the employee, means—

(a)any office or employment which he holds under the employer or which he is to hold under the employer or a person connected with the employer;

(b)any office or employment under the employer or such a person to which he has a serious opportunity of being appointed; or

(c)any office or employment under the employer or such a person as respects which he can realistically expect to have such an opportunity in due course.

(7)Section 839 (meaning of “connected person”) applies for the purposes of this section.

200CExpenditure excluded from section 200B

(1)Section 200B shall not apply in the case of any expenditure to the extent that it is incurred in paying or reimbursing the cost of any facilities or other benefits provided or made available to the employee for one or more of the following purposes, that is to say—

(a)enabling the employee to enjoy the facilities or benefits for entertainment or recreational purposes unconnected with the imparting, instilling, improvement or reinforcement of knowledge, skills or personal qualities falling within section 200B(5)(a) or (b);

(b)rewarding the employee for the performance of the duties of his office or employment under the employer, or for the manner in which he has performed them;

(c)providing the employee with an employment inducement which is unconnected with the imparting, instilling, improvement or reinforcement of knowledge, skills or personal qualities falling within section 200B(5)(a) or (b).

(2)Section 200B shall not apply in the case of any expenditure incurred in paying or reimbursing any expenses of travelling or subsistence, except to the extent that those expenses would be deductible under section 198 if the employee—

(a)undertook the training in question in the performance of the duties of his office or employment under the employer; and

(b)incurred those expenses out of the emoluments of that office or employment.

(3)Section 200B shall not apply in the case of any expenditure incurred in paying or reimbursing the cost of providing the employee with, or with the use of, any asset except where—

(a)the asset is provided or made available for use only in the course of the training;

(b)the asset is provided or made available for use in the course of the training and in the performance of the duties of the employee’s office or employment but not for any other use;

(c)the asset consists in training materials provided in the course of the training; or

(d)the asset consists in something made by the employee in the course of the training or incorporated into something so made.

(4)Section 200B shall apply in the case of expenditure in connection with anything that is a qualifying course of training for the purposes of section 588 to the extent only that section 588(1) does not have effect.

(5)Section 200B shall not apply in the case of any expenditure incurred in enabling the employee to meet, or in reimbursing him for, any payment in respect of which there is an entitlement to relief under section 32 of the [1991 c. 31.] Finance Act 1991 (vocational training).

(6)In subsection (1) above the reference to enjoying facilities or benefits for entertainment or recreational purposes includes a reference to enjoying them in the course of any leisure activity.

(7)In this section—

  • “employment inducement”, in relation to the employee, means an inducement to remain in, or to accept, any office or employment with the employer or a person connected with the employer;

  • “subsistence” includes food and drink and temporary living accommodation; and

  • “training materials” means stationery, books or other written material, audio or video tapes, compact disks or floppy disks.

(8)Section 839 (meaning of “connected person”) applies for the purposes of this section.

200DOther work-related training

(1)For the purposes of Schedule E, where—

(a)any person (“the employee”) who holds an office or employment under another (“the employer”) is provided by reason of that office or employment with any benefit,

(b)that benefit consists in any work-related training or is provided in connection with any such training, and

(c)the amount which (apart from this section and sections 200B and 200C) would be included in respect of that benefit in the emoluments of the employee (“the chargeable amount”) is or includes an amount that does not represent expenditure incurred by the employer,

the questions whether and to what extent those emoluments shall in fact be taken to include an amount in respect of that benefit shall be determined in accordance with those sections as if the benefit had been provided by means of a payment by the employer of an amount equal to the whole of the chargeable amount.

(2)In this section “work-related training” has the same meaning as in section 200B.

(2)In section 200A(3)(b) of that Act (definition of a qualifying absence from home), the word “either” before sub-paragraph (i) shall be omitted and, at the end of sub-paragraph (ii), there shall be inserted or

(iii)expenses the amount of which, having been paid or reimbursed by the person under whom he holds that office or employment, is excluded from his emoluments in pursuance of section 200B, or

(iv)expenses the amount of which would be so excluded if it were so paid or reimbursed.

(3)This section applies for the year 1997-98 and subsequent years of assessment.

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